UACN Property Development Company Plc...UACN Property Development Company Plc RC321582 Rights Issue of 15,961,574,145 Ordinary Shares of 50 kobo each at N=1.00 per Share on the basis

You are advised to read and understand the contents of this Rights Circular. If you are in any doubt about the actions to be taken, you should consult your Stockbroker, Accountant, Banker, Solicitor or any other professional adviser for guidance immediately. Investors are advised to note that liability for false or misleading statements or acts made in connection with the Rights Circular is provided in sections 85 and 86 of the Investments and Securities Act No. 29, 2007 (the “Act”)

For information concerning certain risk factors which should be considered by

prospective investors, see Risk Factors on page 31 to 34

UACN Property Development Company Plc RC321582

Rights Issue of

15,961,574,145 Ordinary Shares of 50 kobo each at

N=1.00 per Share

on the basis of 43 new Ordinary Shares

for every 7 Ordinary Shares held as at the close of business on Monday, 30 September 2019

The rights being offered in this Rights Circular are tradable on the floor of The

Nigerian Stock Exchange for the duration of the Acceptance period of the Issue.

Payable in full on Acceptance

ACCEPTANCE LIST OPENS: Monday, 10 February 2020 ACCEPTANCE LIST CLOSES: Friday, 13 March 2020

Issuing House:

RC1031358

This Rights Circular and the securities which it offers have been cleared and registered by the Securities and Exchange Commission. The Investments and Securities Act No. 29, 2007 provides for civil and criminal liabilities for the issue of a Rights Circular which contains false or misleading information. The clearance and registration of this Rights Circular and the securities which it offers do not relieve the parties of any liability arising under the Act for false and misleading statements or for any omission of a material fact in this Rights Circular.

This Rights Circular is dated 31 January 2020

2

IMPORTANT NOTICE

Notice to Shareholders outside Nigeria The distribution of this Rights Circular and the offer of the Shares in certain jurisdictions may be restricted by law. No action has been taken by the Issuer or the Issuing House that would permit a public offer of shares or possession, publication or distribution of this Rights Circular (or any other offer or publicity material or application form relating to the Issue) in any jurisdiction where action for the purpose is required, other than in Nigeria. Persons into whose possession this Rights Circular comes should inform themselves about and observe such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This Rights Circular does not constitute an offer of, or an invitation to subscribe or purchase, any shares being offered in any jurisdiction in which such an offer would be unlawful. Forward Looking Statements Certain statements in this Rights Circular may constitute forward looking statements that involve a

number of risks and uncertainties. These forward looking statements include statements regarding the

Company’s intentions, beliefs or current expectations concerning, amongst other things, the

Company’s strategies, future plans and the industry in which it operates. Prospective investors should

be aware that forward looking statements are not guarantees of future performance and that the

Company’s actual results of operations, financial condition and liquidity, and the development of the

industry in which it operates may differ materially from those made in or suggested by the forward

looking statements contained in this Rights Circular. Actual results could differ materially from those

contained in such forward looking statements as a result of a variety of factors.

The Directors collectively and individually accept full responsibility for the information contained in this

Rights Circular. To the best of the knowledge and belief of the Directors (having made all reasonable

enquiries to ensure that such is the case), the information contained in this Rights Circular is in

accordance with the facts and contains no omission likely to affect its import.

The Issuing House and/or any of its affiliates, acting as shareholders for their own accounts, may take up shares in the Issue and in that capacity may retain, purchase, sell, offer to sell or otherwise deal in such Shares for their own account and any other securities of the Company or related investments and may offer or sell such Shares or other investments other than in connection with the Issue.

No person has been authorised to give any information or make any representations other than those contained in this Rights Circular and if given or made, such information or representations must not be relied on as having been authorised by the Company and/or the Issuing House or any of their respective subsidiaries or affiliates.

The information contained in this Rights Circular has been provided by the Company and other sources duly identified herein. The Issuing House makes no representation, express or implied, or accept any responsibility, with respect to the accuracy or completeness of any information in this Rights Circular. Each Shareholder should read this Rights Circular in its entirety and determine by himself/herself the relevance of the information contained herein and each Shareholder’s acceptance of his/her rights should be based upon such investigation as is deemed necessary. In making an investment decision, Shareholders must rely upon their own examination of the Company and the terms of this Rights Circular, including the risks involved.

3

CONTENTS

DEFINITIONS ........................................................................................................................................................ 4

INDICATIVE TIMETABLE ..................................................................................................................................... 6

CORPORATE DIRECTORY ................................................................................................................................. 7

SUMMARY OF THE RIGHTS ISSUE ................................................................................................................... 8

THE RIGHTS ISSUE ........................................................................................................................................... 12

DIRECTORS, COMPANY SECRETARY AND PARTIES TO THE ISSUE ....................................................... 13

THE CHAIRMAN’S LETTER .............................................................................................................................. 14

OVERVIEW OF UACN PROPERTY DEVELOPMENT COMPANY PLC ......................................................... 16

1. HISTORICAL OVERVIEW .................................................................................................................... 16 2. BUSINESS OVERVIEW ....................................................................................................................... 16 3. GROUP STRUCTURE ........................................................................................................................ 16 4. DEVELOPMENT TRACK RECORD ........................................................................................................ 17 5. FUTURE STRATEGIC PLANS .............................................................................................................. 24 6. PROPOSED CORPORATE RESTRUCTURINGS ....................................................................................... 24 7. INVESTMENT HIGHLIGHTS ................................................................................................................. 25 8. BOARD OF DIRECTORS ..................................................................................................................... 26 9. MANAGEMENT TEAM ........................................................................................................................ 28 10. OVERVIEW OF THE NIGERIAN REAL ESTATE SECTOR ........................................................................... 29 11. RISK FACTORS ................................................................................................................................ 31

LETTER FROM THE AUDITORS ON THE GOING CONCERN STATUS ....................................................... 35

LETTER FROM THE DIRECTORS ON THE GOING CONCERN STATUS ..................................................... 36

INCORPORATION BY REFERENCE ................................................................................................................ 37

FINANCIAL INFORMATION ............................................................................................................................... 38

1. STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME (GROUP) ............................... 38 2. STATEMENT OF FINANCIAL POSITION (GROUP) ................................................................................... 39 3. STATEMENT OF CASH FLOWS (GROUP) ............................................................................................. 40

STATUTORY AND GENERAL INFORMATION ................................................................................................ 41

1. INCORPORATION AND SHARE CAPITAL HISTORY .................................................................................. 41 2. SHAREHOLDING STRUCTURE ............................................................................................................ 41 3. DIRECTORS’ BENEFICIAL INTERESTS .................................................................................................. 41 4. INDEBTEDNESS ................................................................................................................................ 42 5. OFF BALANCE SHEET ITEMS ............................................................................................................. 42 6. CLAIMS AND LITIGATION ................................................................................................................... 42 7. PURPOSE OF ISSUE AND USE OF PROCEEDS ...................................................................................... 43 8. COSTS AND EXPENSES..................................................................................................................... 44 9. MATERIAL CONTRACTS .................................................................................................................... 44 10. UNCLAIMED DIVIDENDS .................................................................................................................... 44 11. OVERVIEW OF CORPORATE GOVERNANCE ......................................................................................... 44 12. RESEARCH AND DEVELOPMENT ......................................................................................................... 45 13. MERGERS AND TAKEOVERS .............................................................................................................. 45 14. RELATIONSHIP BETWEEN THE COMPANY AND ITS ADVISERS ................................................................. 45 15. RELATED PARTY TRANSACTIONS ....................................................................................................... 45 16. DECLARATIONS ............................................................................................................................... 46 17. CONSENTS ...................................................................................................................................... 47 18. DOCUMENTS AVAILABLE FOR INSPECTION .......................................................................................... 47

PROVISIONAL ALLOTMENT LETTER ............................................................................................................. 49

RECEIVING AGENTS LIST ................................................................................................................................ 52

PARTICIPATION FORM ..................................................................................................................................... 53

4

DEFINITIONS

In this document, unless otherwise stated or clearly indicated by the context, the following words have the meanings stated opposite them.

“CAMA” Companies and Allied Matters Act, 1990, Cap C20 Laws of the Federation of Nigeria 2004

“CBN” Central Bank of Nigeria

“CHN” Clearing House Number

“CP” Commercial Paper

“Council” Council of The Nigerian Stock Exchange

“Court” The Federal High Court of Nigeria

“CSCS” Central Securities Clearing System Plc

“Daily Official List” Daily Official List of The Nigerian Stock Exchange

“DOT” Deed of Declaration of Trust

“Directors” or the “Board” The members of the Board of Directors of UACN Property Development Company Plc who as at the date of this document are those persons whose names are set out on page 13 of this Rights Circular

“Federal Government” or “FGN” Federal Government of Nigeria

“Group” UACN Property Development Company Plc, its subsidiaries

and joint ventures

“IFRS” International Financial Reporting Standards

“ISA” or the “Act”

Investments and Securities Act No. 29, 2007

“Issue” or “Rights Issue” The Rights Issue by way of provisionally allotted rights to shareholders whose names appear on the Register of Members as at the close of business on 30 September 2019, of 15,961,574,145 Ordinary Shares of 50 kobo each in the Company, on the basis of 43 new Ordinary Shares for every 7 Ordinary Shares held by them on that date

“Issuing House” Stanbic IBTC Capital Limited

“Management” Management of UACN Property Development Company Plc

“NEFT” NIBSS Electronic Funds Transfer

“NIBSS” Nigeria Inter-Bank Settlement System

“Ordinary Shares” The Ordinary Shares of 50 kobo each in the share capital of

the Company

“Participation Form” Form that must be duly completed by each shareholder in

order to participate in the Rights Issue as contained on pages 53 and 54 of this Rights Circular

DEFINITIONS

5

“Qualification Date” 30 September 2019

“Receiving Agents” Any of the institutions listed on page 52 of this Rights Circular to which shareholders may return their completed Participation Forms together with payment/evidence of payment

“Receiving Bank” Stanbic IBTC Bank PLC

“Register of Members” The register that records the names and addresses of the ordinary shareholders of the Company

“Registrars” Africa Prudential Plc

“Rights Circular” This document, which is issued in accordance with the rules and regulations of the Commission

“RIN”

Registrar Identification Number created under the Registrars CSCS position for shareholders who do not have CSCS accounts to warehouse their units of shareholding in public companies

“RTGS” Real Time Gross Settlement

“SEC” or the “Commission” Securities and Exchange Commission

“Solicitors” Banwo & Ighodalo

“sq.m” and “Square Meters” The area equal to a square that is 1 meter on each side. Used for measuring areas of rooms, houses, blocks of land, etc

“Stockbrokers” Stanbic IBTC Stockbrokers Limited

“The NSE” or “The Exchange” The Nigerian Stock Exchange

“UAC” or “UAC of Nigeria” UAC of Nigeria Plc

“UPDC” or the “Company” or the “Issuer” UACN Property Development Company Plc

“UPDC REIT” or the “REIT” UPDC Real Estate Investment Trust

“Working Day” or “Business Day” A day other than a Saturday, Sunday or public holiday on which banks are open for business in Nigeria

6

INDICATIVE TIMETABLE

The dates below, which reflect principal events of the Rights Issue, are indicative only and subject to change without notice:

DATE ACTIVITY RESPONSIBILITY

10 February 2020 Acceptance List opens / Trading in Rights begins Issuing House / Stockbrokers

13 March 2020 Acceptance List closes / Trading in Rights closes Issuing House / Stockbrokers

20 March 2020 Receiving Agents make returns Issuing House / Receiving Agents / Registrars

01 April 2020 File allotment proposal and draft newspaper announcement with SEC

Issuing House

03 April 2020 Receive SEC’s clearance of allotment proposal Issuing House

06 April 2020 Pay net Issue proceeds to UPDC Receiving Bank

06 April 2020 Credit CSCS accounts Registrars

07 April 2020 Publish Allotment announcement Issuing House

09 April 2020 Listing of new UPDC shares / trading commences Stockbrokers

14 April 2020 Return surplus / rejected application monies Issuing House / Registrars

14 April 2020 Forward Declaration of Compliance to The Exchange

Stockbrokers

04 May 2020 Forward Issue summary report to SEC Issuing House

7

CORPORATE DIRECTORY

1. Head Office and registered address

UACN Property Development Company Plc UAC House 1 - 5 Odunlami Street Lagos Tel: +234 815 989 0026 Email: [email protected] Web: www.updcplc.com

8

SUMMARY OF THE RIGHTS ISSUE

This summary draws attention to information contained elsewhere in this Rights Circular; it does not contain all of the information you should consider in making your investment decision. You should therefore read this summary together with the more detailed information, including the financial summary elsewhere in this Rights Circular.

1. Issuer: UACN Property Development Company Plc.

2. Issuing House: Stanbic IBTC Capital Limited.

3. Share Capital: Authorised: N=9,300,000,000 divided into 18,600,000,000 Ordinary Shares of

50 kobo each.

Issued and fully paid: N=1,299,197,895.50 divided into 2,598,395,791 Ordinary Shares of 50 kobo each.

Now being issued: 15,961,574,145 Ordinary Shares of 50 kobo each at N=1.00 per share.

Gross Issue Proceeds: N=15,961,574,145.00.

4. Purpose:

The Rights Issue is being undertaken to enable UPDC pay down its short-term debt obligations, thereby reducing financing costs.

5. Use of Proceeds: The net Issue proceeds estimated at N=15,765,864,545.56 (after deducting issue costs of N=195,709,599.44 representing 1.23% of the gross Issue proceeds) will be applied as shown below:

In line with Management’s efforts to reduce the financing cost burden of UPDC’s debt, the Company obtained a one-year N=16 billion loan facility from UAC. The bridge loan facility has been utilised to pay down all of the Company’s maturing short term debt obligations;

• N=6,498,035,000.00 Commercial Paper (“CPs”);

• N=7,368,122,124.62 CP-related liquidity support facility from Coronation Merchant Bank Limited and FBN Quest Merchant Bank Limited; and

• N=2,133,842,875.38 intra-group working capital facility. The net Issue proceeds will be applied towards repayment of the bridge loan facility which is the only outstanding short term debt obligation of the Company. The shareholders’ resolution approving the Rights Issue provides that any outstanding convertible loan, shareholder loan or loan facility due to any shareholder from the Company may be applied towards payment for any shares subscribed for by such person under the capital raise. Details on the use of proceeds are provided on page 43.

Utilisation N=’bn % Time to completion

1. Repayment of short-term debt obligations

15.77 100 Immediate

15.77 100

6. Method of Issue: By way of rights to existing shareholders.


9

7. Provisional Allotment: 43 new Ordinary Shares for every 7 Ordinary Shares of 50 kobo each held as at the close of business on 30 September 2019 by those shareholders whose names appear on the Register of Members and transfer books of the Company as at that date.

8. Issue Price per share: N=1.00.

9. Payment: In full on acceptance.

10. Market capitalisation at Rights Issue Price (Pre-Issue):

N=2,598,395,791.00.

11. Market capitalisation at Rights Issue Price (Post-Issue):

On completion of the Rights Issue, assuming all provisionally allotted Ordinary Shares are fully taken up, the Company will have a market capitalisation of N=18,559,969,936.00.

12. Opening Date: 10 February 2020.

13. Closing Date: 13 March 2020.

14. Qualification Date: 30 September 2019.

15. Application for Additional Shares:

Ordinary shares which are not taken up by close of the Issue will be allotted on a pro-rata basis to existing shareholders who applied and paid for additional shares over and above their provisional allotment. Shareholders, who do not accept their provisional allotment in full, may have their shareholding in the Company diluted.

16. Underwriting:

This Issue is not underwritten.

17. Consolidated Financial Summary:

-------------------------->N=’millions Audited year ended 31 Dec


10

19. Status: The new Ordinary Shares being issued will rank pari passu in all respects with the existing issued Ordinary Shares of the Company.

20. Dividend Qualification

The shares being issued shall qualify for any dividend (or any other distribution) declared for the financial year ending 2019, as long as the qualification date for the dividend (or any other distribution) declared is after the allotment of the Ordinary Shares now being issued.

21. Indebtedness: As at the date of this Rights Circular, the Company had outstanding indebtedness of N=20.27 billion, comprising of the N=16 billion one-year bridge facility obtained from UAC and N=4.27 billion outstanding under its five-year bond issue. It should also be noted that there is outstanding indebtedness in certain joint venture companies in which UPDC has a significant shareholding. First Festival Mall Limited (joint venture company for the retail mall in Festac, Lagos in which UPDC is a 45% shareholder) has outstanding bank loans of c.N=4.3 billion and US$9.15 million (out of which, UPDC provided a revenue support guarantee of US$2 million). UPDC Metro City Limited (joint venture company for a serviced residential estate development in Abuja in which UPDC is a 60% shareholder) has an outstanding bank loan of c.N=130 million as at 30 September 2019. Aside these bank facilities, the joint venture companies also have amounts outstanding to trade creditors arising in the ordinary course of business.

22. Claims and Litigation:

As at 30 June 2019, UPDC was involved in Forty-Five (45) cases in the ordinary course of its business. Of the Forty-Five (45) cases, UPDC has been sued as Defendant in Twenty-Nine (29) cases by various individuals and organizations and is Claimant in Eight (8) cases. UPDC is Counter-Claimant in Eleven (11) of the Twenty-Nine (29) cases instituted against it; Defendant to counter-claim in One (1) case out of the Eight (8) cases instituted by it; and a Defendant to counter-claim in One (1) case out of the Twenty-Nine (29) cases instituted against it by various individuals and organizations. Further, UPDC is Appellant in Five (5) cases in which judgment had previously been delivered against it, while it is Respondent in Three (3) cases in which ruling/judgment had been delivered in its favour. The total monetary claim against UPDC including the Two (2) counter-claims in which UPDC is a Defendant, is approximately N=3,065,934,227.44 (Three Billion, Sixty-Five Million, Nine Hundred and Thirty-Four Thousand, Two Hundred and Twenty-Seven Naira, Forty- Four Kobo). The total monetary claim by UPDC including the Eleven (11) counter-claims out of the Twenty-Nine (29) cases instituted against it, is approximately N=900,965,063.91 (Nine Hundred Million, Nine Hundred and Sixty-Five Thousand, Sixty-Three Naira, Ninety-One Kobo). Please note that the amounts referred to herein, do not include interest and costs, which can only be ascertained or determined after the final resolution of the cases. Ultimately, the actual liability of UPDC in these cases, including final awards for costs, will be as determined by the courts upon conclusion of the respective suits. The Solicitors are of the opinion that, if the matters continue to be diligently prosecuted by UPDC, the contingent liability that would arise from the cases would not have a material adverse effect on UPDC or the proposed Rights Issue. The Directors of UPDC are of the opinion that none of the aforementioned cases is likely to have any material adverse effect on UPDC and are not


11

UPDC Hotels Limited

Manor Gardens Property

Development

95% 68%

UPDC Real Estate Investment Trust

(62%)

UPDC Metro City Limited

(60%)

Pinnacle Apartments Dev.

Limited

(51%)

Transit Village Dev. Company

Limited

(40%)

First Restoration Dev Company

Limited

(51%)

Calabar Golf Estate Limited

(51%)

First Festival Mall Limited

(45%)

Subsidiaries

JV / Associates

aware of any other pending and/or threatened claim or litigation other than the Forty-Five (45) cases referenced above.

23. Settlement: The CSCS accounts of shareholders will be credited immediately after allotment. Shareholders are hereby advised to state the name of their respective stockbrokers, their CHN and CSCS account numbers in the relevant spaces on the Participation Form. Any shareholder who does not have a valid CHN and CSCS account number, is advised to open a stockbroking account with a stockbroker and obtain a valid CHN and CSCS account number from the stockbrokers. In accordance with the SEC directive on dematerialization of share certificates, shareholders who do not provide valid CHN and CSCS account numbers will have their shares credited at the CSCS using a Registrar Identification Number. A Registrar Identification Number is a number allocated to shareholders who do not have valid CHN and CSCS account numbers to warehouse their units of shareholding in public companies under Registrars custody at the CSCS. The allotted shares will be transferred to the stockbroking account of the shareholder once valid CHN and CSCS account numbers are provided.

24. Group Structure

12

THE RIGHTS ISSUE

A copy of this Rights Circular and the documents specified herein have been delivered to the Securities and Exchange Commission for clearance and registration. This Rights Circular is issued in compliance with the provisions of the Investments and Securities Act No. 29, 2007, the rules and regulations of the Commission and the listing requirements of The Exchange and contains particulars in compliance with the requirements of the Commission and The Exchange for the purpose of giving information to the public with regards to the Rights Issue of 15,961,574,145 Ordinary Shares of UACN Property Development Company Plc by Stanbic IBTC Capital Limited. An application has been made to the Council of The Exchange for the admission to its Daily Official List of the 15,961,574,145 Ordinary Shares being offered via the Rights Issue. The Directors of UACN Property Development Company Plc individually and collectively accept full responsibility for the accuracy of the information contained in this Rights Circular. The Directors have taken reasonable care to ensure that the facts contained herein are true and accurate in all respects and confirm, having made all reasonable enquiries that to the best of their knowledge and belief, there are no material facts the omission of which would make any statement herein misleading or untrue. The shares to be issued by the Company pursuant to the Rights Issue will rank pari passu in all respects with the existing issued Ordinary Shares of the Company.

STANBIC IBTC CAPITAL LIMITED RC1031358

on behalf of

UACN PROPERTY DEVELOPMENT COMPANY PLC RC321582

is authorised to receive acceptances for the

RIGHTS ISSUE OF

15,961,574,145 ORDINARY SHARES OF 50 KOBO EACH

AT N=1.00 PER SHARE

on the basis of 43 new Ordinary Shares for every 7 Ordinary Shares held as at the close of business on Monday, 30 September 2019

Payable in full on Acceptance

The Acceptance List for the shares now being issued will open on Monday, 10 February 2020 and close on Friday, 13 March 2020.

SHARE CAPITAL AND RESERVES OF THE COMPANY AS AT 30 SEPTEMBER 2019

N= ’000

AUTHORISED* 18,600,000,000 Ordinary Shares of 50 kobo each 9,300,000

ISSUED AND FULLY PAID 2,598,395,791 Ordinary Shares of 50 kobo each 1,299,198

EQUITY Share Capital 1,299,198 Share Premium 6,065,397 Retained Earnings (3,782,814) Non-Controlling Interest (178,276)

Total Equity 3,403,505

*At the Company’s Annual General Meeting on 03 July 2019, the Shareholders passed a resolution to increase the Company’s authorised share capital to N=9,300,000,000 divided into 18,600,000,000 ordinary shares of 50 kobo each.

13

DIRECTORS, COMPANY SECRETARY AND PARTIES TO THE ISSUE

Directors: Mr Babatunde Kasali (Chairman) UAC House 1 - 5 Odunlami Street Lagos Mr Folasope Aiyesimoju (Chief Executive Officer) UAC House 1 - 5 Odunlami Street Lagos Mrs Deborah Nicol-Omeruah (Deputy Managing Director) UAC House 1 - 5 Odunlami Street Lagos Mrs Folakemi Fadahunsi (Executive Director) UAC House 1 - 5 Odunlami Street Lagos Mrs Awuneba Ajumogobia (Non-Executive Director) UAC House 1 - 5 Odunlami Street Lagos Professor Okon Ansa (Non-Executive Director) UAC House 1 - 5 Odunlami Street Lagos Mr Adekunle Awojobi (Non-Executive Director) UAC House 1 - 5 Odunlami Street Lagos Mr Babajide Fetuga (Alternate Non-Executive Director) UAC House 1 - 5 Odunlami Street Lagos Mr Oyekunle Osilaja (Non-Executive Director) UAC House 1 - 5 Odunlami Street Lagos Company Secretary: Mrs Folake Kalaro UAC House 1 - 5 Odunlami Street Lagos

Issuing House: Stanbic IBTC Capital Limited I.B.T.C. Place Walter Carrington Crescent Victoria Island Lagos Stockbrokers: Stanbic IBTC Stockbrokers Limited I.B.T.C. Place Walter Carrington Crescent Victoria Island Lagos Solicitors: Banwo & Ighodalo 48 Awolowo Road Ikoyi Lagos Auditors: Ernst & Young 10th & 13th Floors, UBA House 57 Marina Lagos Registrars: Africa Prudential Plc 220B, Ikorodu Road Palmgrove Lagos Receiving Bank: Stanbic IBTC Bank PLC I.B.T.C. Place Walter Carrington Crescent Victoria Island Lagos Audit Committee Mr Adekunle Awojobi (Chairman) Mr Joe Anosikeh (Member) Professor Okon Ansa (Member) Engineer Taiwo Fawole (Member) Alhaji Gbadebo Olatokunbo (Member)

14

THE CHAIRMAN’S LETTER

The following is the text of a letter received by Stanbic IBTC Capital Limited from Mr Babatunde Kasali, Chairman, Board of Directors of UACN Property Development Company Plc.

31 January 2020 Dear Shareholders RIGHTS ISSUE OF 15,961,574,145 ORDINARY SHARES OF 50 KOBO EACH AT N=1.00 IN UACN PROPERTY DEVELOPMENT COMPANY PLC Over the years, UACN Property Development Company Plc (“UPDC”) has grown to become one of Nigeria’s leading indigenous real estate companies, engaging in the acquisition, development, sales and management of high-grade residential and commercial properties. The Company has built a long-standing track record within the Nigerian real estate sector, having completed multiple landmark residential and commercial developments, successfully sold high-quality properties across the country and developed in-depth experience in delivering excellent facilities management services. The Company also possesses a footprint within the retail and hospitality segments through the development of commercial malls and a 471 room hotel respectively. More recently, the Company expanded its geographic footprint, embarking on projects in Abuja, Oyo, Delta and Cross River States. The latter phase of the Company’s expansionary drive coincided with the recession that impacted Nigeria in Q1 2016, affecting overall economic activity; the real estate sector was particularly affected with significant declines in asset values and rental rates. Nigeria’s broader economy emerged from recession in Q4 2017; however, the real estate sector has continued to struggle on account of the Naira devaluation, reduced consumer spending, levels of leverage and attendant borrowing cost, reduced volume and value of investments, high vacancy rates / low demand, a lull in construction and challenges securing adequate funding. The extended decline in the Nigerian real estate sector negatively impacted UPDC’s performance, leaving the Company with significant challenges in meeting debt obligations incurred to fund historical growth. The combined effects of low asset sales, reduced rental yields, decline in the market values of properties and high financing costs from the Company’s short-term obligations affected UPDC’s financial performance resulting in annual losses since 2016. To address the Company’s most pressing challenges and avert a liquidity challenge, steps were taken to restructure the debt portfolio - including the conversion of existing short-term debt into equity or longer tenured debt capital through the rights issue undertaken in 2017 and a corporate bond issuance in 2018. These efforts provided short-term benefit but were insufficient to fully address UPDC’s capital structure challenges as the Company was unable to settle the significant portion of its short-term obligations in the form of commercial papers (“CP”). As the Company has struggled to generate sufficient cash flow to redeem the CPs, these instruments have been repeatedly rolled-over, resulting in increasing indebtedness for the business. This is evident from the increase in the Company’s CP obligations from N=10.4 billion as at December 2014 to N=14.3 billion as at 31 December 2018. To address imminent maturing debt obligations and reduce high debt servicing costs associated with CPs, the Company obtained a one-year N=16 billion bridge loan from its majority shareholder, UAC of Nigeria Plc (“UAC”) to settle all its outstanding short-term debt liabilities and prevent a further increase in the Company’s debt balance with attendant value erosion. The capital provided by UAC is a debt instrument and thus UPDC’s overall debt levels remains high (total debt-to-equity ratio of 102.8% as at 31 December 2018). Hence, the Company is currently in need of an equity injection to restore the balance sheet to a more sustainable position. After careful deliberations, the Board has now recommended the Company seek fresh equity via a Rights Issue to significantly deleverage the Company’s balance sheet by settling the N=16 billion bridge

THE CHAIRMAN’S LETTER

15

loan. The Rights Issue will afford all shareholders an opportunity to support the Company’s restructuring and deliver a more sustainable capital structure that will be the platform for future growth. Furthermore, the Board intends to simplify UPDC’s Group structure via the unbundling of UPDC’s interest in the UPDC Real Estate Investment Trust (“UPDC REIT” or the “REIT”) to its shareholders on a pro rata basis, allowing UPDC shareholders to directly own units in the REIT. This will better position UPDC’s shareholders to directly benefit from the REIT’s future dividend payments. In the last 3 years (2016 – 2018), UPDC received distributions totalling c.N=3.0 billion from UPDC REIT but the Company was unable to pass this on to its shareholders and declared no dividend during this period. Following the proposed unbundling, UPDC’s shareholders will become the recipients of any future distributions by UPDC REIT. The simplified structure will also allow UPDC focus on its future strategy which is expected to involve realignment of the Company’s business model, undertaking large scale real estate developments for pre-identified tenants with the unique benefit of providing end to end solutions from site acquisition to investment appraisal, development and construction management, leasing and tenanting and asset and facilities management. The Company will be positioned as an owner of high yielding assets with high quality institutional tenants. It is important to note that the unbundling of UPDC REIT is subject to regulatory and shareholders’ approvals, which are expected to be obtained upon completion of the Rights Issue.

Similarly, the Company’s parent, UAC, is exploring a reorganisation that will involve streamlining its sector focus and simplifying its corporate structure by transferring its entire holding in UPDC to its own shareholders. As a result, UPDC will cease to be a subsidiary of UAC. While UPDC has benefitted from having UAC as a controlling shareholder, the Board and management team of a standalone, recapitalised and restructured UPDC will pursue deliberate strategies to create stakeholder value. The Board sees significant opportunities in Nigeria’s real estate sector over the long-term; capturing these opportunities will require access to significant quantum of appropriately structured capital. UPDC’s cash flow profile and capital needs vary considerably with other entities within UAC’s portfolio. As a standalone entity, UPDC will target appropriate sources of capital to meet its long-term growth ambitions. Regulatory and shareholders’ approvals for the proposed unbundling by UAC are expected to be obtained upon completion of the Rights Issue.

At the Annual General Meeting of the Company held on 03 July 2019, shareholders authorised the Directors of the Company to raise additional capital by way of a rights issue to existing shareholders. At a subsequent meeting of the Directors held on 03 July 2019, the Board authorised the Rights Issue of 15,961,574,145 Ordinary Shares at N=1.00 per share.

All necessary arrangements have now been concluded for the Rights Issue which will be offered to shareholders whose names appeared in the Company’s Register of Members as at 30 September 2019, in the proportion of 43 new Ordinary Shares for every 7 Ordinary Shares held by them on that date. We have received approval from the Securities and Exchange Commission for the registration of the shares and listing approval has been granted by The Nigerian Stock Exchange. The shares will rank pari passu in all respects with the existing issued Ordinary Shares of the Company.

The Rights Circular contains our Company’s history, strengths, future plans, general information relating to our Company and summary historical financial information. The Rights Circular also contains a provisional allotment letter from the Company Secretary, which provides full instructions for the acceptance, payment and renunciation of your rights to the provisional allotment.

I urge you to participate in the Rights Issue by taking up your rights in full and also subscribing for additional shares.

Thank you.

Yours faithfully

Mr Babatunde Kasali Chairman

16

OVERVIEW OF UACN PROPERTY DEVELOPMENT COMPANY PLC

1. HISTORICAL OVERVIEW

In 1879, the United African Company was formed following the merger of four European companies trading up the River Niger including Alexander Miller Brother & Company, Central African Trading Company Limited, West African Company and James Pinnock. The merged company’s trading activities required the use of warehouses for produce, and offices and exclusive residential accommodation for the managers. The United African Company thus ended up with a significant real estate holding in all parts of Nigeria to support its operations. UPDC operated initially as a department to manage these real estate holdings and thereafter became a division of UAC of Nigeria Plc. In 1997, UPDC was incorporated as a public limited liability company and all the investment properties held by UAC were transferred to the Company via a scheme of arrangement. The Company’s shares were listed on The Nigerian Stock Exchange (“The NSE”) on 19 November 1998. In 2013, UPDC sponsored the establishment of the UPDC Real Estate Investment Trust. The 3,000,000,000 authorised units of the REIT, of which 2,668,269,500 were issued at N=10.00 each, was subsequently listed on The NSE in July 2013.

2. BUSINESS OVERVIEW

UPDC is a leading real estate company in Nigeria and has successfully engaged in property development and management, focusing on providing quality residential properties, housing estates and commercial real estate. The Company has created a large, diverse portfolio of real estate assets, adopting a client-focused approach to property design and development. UPDC is committed to creating comfortable living and working environments in Nigeria’s key commercial centres. The Company recently reconfigured its strategic focus to take advantage of emerging opportunities in residential and commercial developments, away from its historical concentration on the premium segment of the real estate market. UPDC aims to strengthen its pivotal role in the sector through exceptional customer service, increased stakeholder engagement supported by a vibrant corporate responsibility agenda and ultimately, delivery of superior returns to investors. UPDC’s total asset base was c. N=32 billion as at 30 September 2019. The Company recently undertook several major development projects including The Residences, Festac; Golf Estate, Calabar; Vintage Gardens, Port Harcourt; James Pinnock, Lekki and Pineville, Asaba. UPDC’s operating model is based on annuity income from investment properties and sales proceeds and fees from project development through direct investment and joint ventures with state governments, land owners, real estate developers and financiers. These joint ventures allow the Company to undertake large projects without solely relying on its own balance sheet for funding. Examples of these joint venture projects include Romay Gardens, Lekki; Anchorage Estate, Amuwo-Odofin; Salatu Royal Estate, Abuja; UPDC Metro City, Apo-Dutse Abuja; The Pinnacle Apartments, Maitama Abuja; Olive Court, Agodi GRA Ibadan and Golf Estate, Calabar.

3. GROUP STRUCTURE

UPDC has two subsidiaries namely UPDC Hotels Limited and Manor Gardens Property Development Company Limited. Its joint venture projects are structured as special purpose vehicles and reported in its financials as investments in joint ventures and receivables (i.e. for project investments structured as shareholder loans). The Company also has a c.62% holding in UPDC REIT which is reported as an associate company in its consolidated financial statements, because the Company does not have management control of the REIT. The group structure is illustrated on the following page:


17

4. DEVELOPMENT TRACK RECORD

UPDC’s main business is the acquisition, development, sales and management of high quality, serviced, commercial, and residential properties. Its portfolio includes several residential estates and select commercial properties in Lagos, Abuja, Port-Harcourt, Enugu, Kaduna and Benin.

Details of select completed, on-going and upcoming development projects by the Company are outlined below. It is important to note that in several instances, assets have been sold, while in others, assets are held via joint ventures with certain liabilities attached and in which UPDC is only a part owner. UPDC’s balance sheet, as set out on page 39 of this document, provides an indication of carrying values for assets held by the Company. Completed Projects Victoria Mall Plaza (“VMP”) 1 & 2

VMP 1 & 2 are located on Bishop Aboyade Cole Street, Victoria Island, Lagos. VMP 1 is a residential complex comprising 48 units of luxury apartments while VMP 2 is an ultramodern office with 15 floors. Both properties are fully serviced with constant power supply, professional security services, and beautiful landscaping. Other features include a borehole and water treatment plant, sewage treatment plant, ample parking

space, and fire alarm system. The residential block also has the following facilities: swimming pool, fitness room, children play area and lawn tennis court. The properties were acquired by UPDC REIT under a DOT structure in 2013 in accordance with the terms agreed by the parties. Therefore,

UPDC Hotels Limited

Manor Gardens Property

Development

95% 68%

UPDC Real Estate Investment Trust

(62%)

UPDC Metro City Limited

(60%)

Pinnacle Apartments Dev.

Limited

(51%)

Transit Village Dev. Company

Limited

(40%)

First Restoration Dev Company

Limited

(51%)

Calabar Golf Estate Limited

(51%)

First Festival Mall Limited

(45%)

Subsidiaries

JV / Associates


18

UPDC no longer owns these assets but rather has an indirect interest via its investment in the UPDC REIT. Grandville, Ikeja

Grandville is located on Ladoke Akintola Street, Ikeja, Lagos. The estate sits on approximately 6,000 sq.m of land and consists of 18 units of four-bedroom townhouses with one-room boys’ quarter each. Available facilities include a swimming pool, fitness room and children play area. Other features include a borehole & water treatment plant, fire alarm & burglar alarm systems, ample parking space, and 24-hour security service/CCTV surveillance. The

estate is managed by UPDC. Most units have been sold and the few units historically held as investment properties by UPDC are now being sold, in line with the Company’s strategy to exit its non-core investments. Emerald Court, Abuja Emerald Court is a premium residential development comprising 44 housing units built on 19,000 sq.m of land. The estate is situated at Gudu, opposite Apo Legislative Quarters, Abuja and is fully serviced and managed by UPDC. Most units have been sold and the few units historically held as investment properties by UPDC are now being sold, in line with the Company’s strategy to exit its non-core investments.

Vintage Gardens, Port Harcourt

Vintage Gardens is a fully serviced residential housing estate with 90 housing units located within NAFF Estate, Port Harcourt. Available facilities include swimming pool, fitness room, children play area and a lawn tennis court. Some of the features includes a borehole & water treatment plant, sewage treatment plant, ample parking space and a 24 hour security service/CCTV surveillance. Most units have been sold and the few units historically held as investment properties by UPDC are now being sold, in line

with the Company’s strategy to exit its non-core investments.


19

Cameron Green, Ikoyi

Located on highbrow Cameron Road, Ikoyi and built to exquisite taste, Cameron Green boasts of luxury apartments complete with various recreational facilities. Available facilities include a swimming pool, gymnasium, lawn tennis court, and a children's playground. Other features include ample parking lot, sewage treatment plant, and borehole and water treatment plant. Most units have been sold and the few units historically held as investment

properties by UPDC are now being sold, in line with the Company’s strategy to exit its non-core investments. Metro City, Abuja Residential housing estate located in the serene residential area of Apo-Dutse, Abuja. The estate stretches over 11.17 hectares of land and comprises 225 units of houses in the following typologies:

• 5 bedroom detached houses

• 4 bedroom semi-detached houses

• 4 bedroom terrace houses

• 3 bedroom bungalows

• 2 and 3 bedroom flats

Phase 1 of the estate consisting of 104 units is concluded. Whilst Phase 2 is ongoing with mix of property and serviced plots on sale. The facilities available include a swimming pool, fitness room, children play area, multi-purpose hall, and neighbourhood shopping centre. The estate also has constant power supply, and a sewage treatment plant. The estate is fully managed by UPDC. This asset is held via joint venture which as at the end of June 2019 still owns 18 units and c.31,445 sq.m of land which are available for sale and currently being sold. The joint venture has liabilities attached to these assets. Olive Court 1, Agodi GRA, Ibadan

Located on 2.04 hectares of land in the prime area of Agodi (at Plot 790-793, Oba Biladu 3 Street, off Oba Abimbola Street, Agodi GRA, Ibadan), Olive Court is a residential housing estate consisting of 45 housing units. The facilities available include a swimming pool, fitness room and a children’s play area. Other features are constant power supply, sewage treatment plant, water treatment plant, fire alarm system, burglar alarm system, and ample parking space. This asset

is held via joint venture which as at the end of June 2019 still owns 8 units and c.5,691 sq.m of land which are available for sale and currently being sold. The joint venture has liabilities attached to these assets.


20

Festival Mall, Lagos The Festival Mall project was conceptualized to bridge the gap created by absence of modern formal retail channels in Festac town and its environs. With Golden Tulip Festac Hotel already existing on the site, UPDC seized this opportunity to create a destination point for residents of Festac, Amuwo-Odofin, Mile 2, Ojo, Alaba, Orile and Okota; providing a combination of office space, hospitality, recreation and new-age shopping mall experience. Festival Mall is a joint venture project between UPDC, CapFest Limited and UPDC REIT. Pineville Estate, Asaba

Pineville Estate is a residential housing development with a contemporary design located opposite the Federal High Court in Asaba GRA Phase 3. The stylish estate was built for residents who value comfort, security and serenity, and offers excellent infrastructure and facilities including swimming pool, gymnasium, children’s playground, etc. Most units have been sold. As at the end of June 2019 UPDC still owns 6 units and c.3,124 sq.m of land which

are available for sale and currently being sold. The Residences, Festac This is part of a mixed-use real estate development that offers comfortable best in class residential, commercial and retail accommodation. The Residences consists of 106 units of 1-bedroom apartments and 44 units of 2-bedroom apartments.

The facilities available include constant power supply via an independent power plant, sewage treatment plant, borehole & water treatment plant, and fire alarm and burglar alarm systems. Most units have been sold and the few units still held as inventory stock are available for sale and currently being sold.


21

James Pinnock Place, Lekki James Pinnock Place is a residential estate located on about 3 hectares of land within Pinnock Beach Estate, Lekki, a major site and service scheme executed by UPDC over 10 years ago. The estate comprises the following:

• 5 bedroom detached houses with maid’s room

• 4 bedroom semi-detached houses with maid’s room

• 3 bedroom apartments with maid’s room

• 2 units of 4 bedroom maisonette with maid’s room

The facilities include a swimming pool, gymnasium, clubhouse, and children play ground. Other features are constant power supply, sewage treatment plant, fire alarm system, borehole, water treatment plant, and ample parking space. The development is a joint project between UPDC and UPDC REIT and all housing units of the asset have been sold. Alexander Miller, Lekki Alexander Miller is a premium estate built on 2.43 Hectares of land along Femi Okunnu Estate Road. It comprises 38 units of 4-bedroom detached & semidetached houses with maid’s room each and a recreational building. Available facilities include borehole, water treatment plant, fire & burglar alarm systems, ample parking space, standby generators, streetlights and 24-hour security service/CCTV surveillance. All of the units have been sold. Abebe Court Abebe Court is a residential luxury estate located on Bourdillon road in Ikoyi, Lagos. The property comprises 26 units of 3-bedroom and 4-bedroom flats with a land size of 11,654 sq.m. Facilities provided in the estate include a swimming pool, water treatment plants, two standby generators, a lawn tennis court and a gym. Occupants include a mix of corporate clients, and individual clients. The property was acquired by UPDC REIT under a DOT structure in 2013 in accordance with the terms agreed to by the parties. Therefore, UPDC no longer owns these assets but rather has an indirect interest via its investment in the UPDC REIT.


22

Pinnacle Apartments The Pinnacle is a residential estate located in the highbrow Maitama area of Abuja with picturesque landscape filled with ample trees and lush vegetation in line with UPDC’s goal of sustainability. The estate comprises 27 luxury apartments. All apartments have a luxury finish and are equipped with fitted kitchens and air conditioners. The Pinnacle is a joint venture between UPDC and Imani & Sons Nigeria Limited. The facilities available include a swimming pool, gymnasium, children playground, constant power supply, borehole, water treatment plant, 24-hour professional security services with CCTV and ample parking space. This asset is held via joint venture and most units were sold upon completion of the project and the last few units (3 units as at the end of June 2019) are available for sale and currently being sold. UAC Commercial Complex, Abuja UAC Commercial Complex is a 4-storey office complex with 17 rental units, located in the central business district, Abuja. The property has a net lettable space of 3,536 sq.m and is rented by various corporate clients. The property was acquired by UPDC REIT under a DOT structure in 2013 in accordance with terms agreed by the parties. Therefore, UPDC no longer owns these assets but rather has an indirect interest via its investment in the UPDC REIT. Projects Under Construction Victoria Mall Plaza 3

Victoria Mall Plaza 3 is a mixed-use commercial development that combines retail, multi-storey parking, event centre and office spaces on a land area of 7,796 sq.m along Bishop Aboyade Cole Street, Victoria Island, Lagos. Key features of the development include flexible retail shops, food court, multi-storey car park, luxury sanitary wares and fittings, and kitchen and preparation area for the event centre. This

project has stalled. VMP 4 Development of Luxury Flats VMP 4 is a proposed residential luxury apartment development located in Victoria Island, Lagos. The project is expected to comprise 25 residential housing units broken down as follows:

• A 4-bedroom pent house apartment;

• 6 units of 3-bedroom apartments; and

• 18 units of 2-bedroom apartments.

This project has stalled.


23

Upcoming/Pipeline Projects Proposed Grade A Commercial Office UPDC intends to build an iconic Grade A commercial office within the Lagos central business district. The planned development is expected to occupy an 18,000 sq.m land area, with 50% to be pre-let to a large corporation. UPDC is focused on acting as a developer, earning a development fee. Proposed mixed-use office and residential campus This project is a 53,000 sq.m mixed-use office and residential campus being purpose built for a multi-national client. The development will be located in Lagos, and take-up is guaranteed given 100% off-take of the entire development. UPDC is exploring converting the VMP 3 and 4 sites for this purpose. Commercial development This project is an ultramodern commercial office development within Lagos, expected to occupy 8,000 sq.m land area. 70% of the development is expected to be pre-let to two major corporates.


24

5. FUTURE STRATEGIC PLANS Business model realignment The Company historically generated its earnings primarily from two sources i.e. development of assets for sale and yield purposes, with the bulk of its assets mainly in the development for sale category. However, with no guaranteed off-takers for the development assets for sale, the Company’s cashflows were often exposed to market fluctuations which worsened following the downturn experienced in the real estate sector. The Company intends to restructure its assets portfolio to ensure a substantial portion of its earnings are of a recurring nature with greater cash flow clarity. This objective will be achieved by securing high quality tenants on rental arrangements that translate to attractive yields over longer lease periods, prior to committing capital. Although the focus will largely be on yielding assets, UPDC will opportunistically explore lower capital, quick turnaround developments for sale such as site and service schemes. Maximise value from existing assets The Company is currently focused on improving the performance of a number of its underperforming assets and maximising value for its shareholders. For example, UPDC owns a 471 room hotel carried on its balance sheet at N=8.3 billion (as at 30 September 2019), through its 95% equity stake in UPDC Hotels Limited. The hotel made a loss of N=143.0 million as at September 2019 with an average occupancy rate of 23% for the year. The hotel’s management team has been revamped and is now focused on maximising value from this strategic asset. Market segmentation The Company will look to streamline its activities to enable it build expertise in key focus areas. This will broadly involve narrowing down scope of operations, targeting specific market segments to operate and carefully considering strategic locations across key states in Nigeria in which to own assets by weighing return potential with operational complexity. Proposed strategic focus UPDC will anchor strategic decisions on achieving the best risk adjusted returns on its investments. This will entail considerable care in:

• Capital deployment: the Company will deploy capital towards the outright purchase of assets or focus on assets constructed under turnkey contract with appropriate penalties for default by contractors and financial protections in its favour.

• Return on capital: to achieve and ensure return on capital, UPDC will engage in development projects that provide guaranteed initial yield prior to project commencement. Also, the Company will explore generating returns via asset improvements, leverage and attractive exits.

• Segment focus: UPDC will differentiate itself from competitors by playing to its strengths, based on scale or complexity, as well as transact primarily with strong institutional clients.

6. PROPOSED CORPORATE RESTRUCTURINGS

Following the completion of the Rights Issue, proceeds of which will be used to pay down the one-year bridge facility, UPDC will have significantly reduced its leverage, allowing for a more sustainable balance sheet that better positions the Company to capture future opportunities. Efforts have also been taken to significantly reduce the Company’s operating expenses, resulting in a leaner and more sustainable UPDC. The UPDC Board wishes to further simplify the Company structure by unbundling its c.62% stake in UPDC REIT. The UPDC REIT is solely focused on acquiring and holding income generating assets that provide annuity-like income for its unitholders. With a history of regular dividend payments (average dividend pay-out ratio of 67% over the last 5 years), the Board wishes to provide UPDC shareholders direct access to the steady returns of UPDC REIT. The proposed unbundling of UPDC REIT from UPDC will allow UPDC to focus on its future strategy of developing


25

high yielding properties. The units of the REIT will be allocated amongst the shareholders based on the shareholding structure of the Company as at the relevant date. The parent company of UPDC, UAC, has also indicated its strategic intent to simplify its holding company structure and exit the real estate sector. As such, UAC intends to unbundle its equity interest in UPDC to its own shareholders. It is important to note at this stage that the proposed corporate restructurings of UPDC and UAC remain subject to their respective shareholders’ approvals, as well as regulatory approvals. Details will be provided for consideration by the shareholders at a future date and the requisite approvals are to be sought during the course of this year.

7. INVESTMENT HIGHLIGHTS

One of the largest listed real estate development companies in Nigeria holding diverse assets with upside potential UPDC is one of the largest listed property companies in Nigeria. The Company boasts of a diverse and unique mix of real estate assets located in attractive locations across all key commercial cities in Nigeria. In its real estate portfolio track record, the Company has developed 872 units of residential accommodation, 8 commercial properties and 3 retail properties. UPDC also possesses a strong footprint within the retail and hospitality segments through the development of commercial malls and a 471 room hotel respectively. The Company is currently focused on improving the performance of a number of its underperforming assets and maximizing value for its shareholders. Excellent reputation and operational track record UPDC has built an excellent reputation within the Nigerian real estate sector over the past 21 years. Since inception, the Company has completed multiple landmark residential and commercial developments, successfully sold high-quality properties across the country to its vast customer base and developed in-depth experience in delivering excellent facilities management services in major cities across Nigeria. UPDC’s established development and project management capabilities and track record of project delivery in major cities in Nigeria, provide the Company with a competitive advantage over existing and new entrants in the Nigerian real estate market. UPDC’s industry leadership has also been attested to by awards received from both international and local agencies. Despite recent challenges, the Company’s track record positions it appropriately for future landmark developments projects. Meaningful asset base post restructuring The Company is currently reviewing its asset portfolio to determine the quantum of assets that either need to be optimised to maximize value or sold and the proceeds thereof reinvested in higher yielding assets or returned to shareholders. However, there may be certain assets that may take a longer period to be liquidated given the size of the investments. Highly experienced management team The Company’s management team is comprised of seasoned professionals with significant local and international experience. The senior management team, supported by strong middle management, has cultivated a deep and extensive knowledge of the Nigerian real estate sector over the years. The management team has recently focused on fostering a culture of responsibility and value optimisation and in doing so, have attracted individuals who are committed to achieving UPDC's strategic objectives. Over time, this team will be further augmented to ensure the Company is well positioned to drive improved future performance. Publicly listed entity with strong corporate governance focus UPDC is listed on the NSE and as such, there is a need to comply with relevant rules and regulations including the corporate governance code. The Board of UPDC is committed to high corporate governance standards and recognises the valuable contribution that strong governance makes to long-term business sustainability and to ensuring accountability and best practice. The composition and structure of UPDC’s eight (8) member board exceeds the prescribed minimum


26

requirements in the SEC’s code of corporate governance for public companies. The Company has also instituted comprehensive and effective corporate governance policies, procedures, and practices. Access to cashflows and potential capital appreciation from UPDC REIT UPDC has received c.N=3 billion in aggregate dividends from its investment in UPDC REIT since 2016. However, UPDC has been unable to pay dividends to its shareholders over the same period given its operating and financing challenges. Following the completion of the Rights Issue, UPDC intends to unbundle its c.62% stake in UPDC REIT, by transferring its units directly to its shareholders pro rata to their holdings. This will ensure that UPDC shareholders gain direct access to the steady dividend income stream of the REIT. Furthermore, the unbundling of UPDC REIT which is subject to regulatory and shareholders’ approvals, is expected to significantly improve free float and impliedly, liquidity of the UPDC REIT units, as the c. 62% bloc of shares held solely by UPDC will subsequently be held by each individual shareholder in UPDC. Henceforth, shareholders will stand to benefit from any potential appreciation in the REIT’s unit price.

8. BOARD OF DIRECTORS

The Board of Directors of UPDC comprises of eight members consisting of five Non-Executive Directors and three Executive Directors. The Board formulates the Board policies and takes executive decisions for the management and operations of UPDC in line with the Company’s objectives. Mr Babatunde Kasali is the Non-Executive Chairman of UPDC. Mr Kasali graduated with a B.Sc. (Hons) Economics degree from Manchester Metropolitan University, United Kingdom (1977). He is a Fellow of the Institute of Chartered Accountants of Nigeria. His work experience includes Audit Senior, Ernst & Young (Chartered Accountants) United Kingdom, Assistant Internal Auditor, Amex Bank Plc, United Kingdom and Principal Manager, Ernst & Young (Chartered Accountants) Nigeria. He was also Chief Inspector, Regional Director, Divisional Director and Regional Bank Head, Consumer and Commercial Banking Group, United Bank for Africa Plc. He is also a member of the UAC Board and the Non-Executive Chairman of Wema Bank Plc. He became the Non-Executive Chairman of UPDC in August 2018. Mr Folasope Aiyesimoju is the Chief Executive Officer of UPDC. Mr Aiyesimoju is a finance professional with experience spanning corporate finance, principal investing and private equity. Over the course of his career, he has lived and worked in Sub-Saharan Africa’s most important economies gaining experience of the operating landscape in the region. He holds a B.Sc. (Hons) degree in Estate Management from the University of Lagos (2002), where he was awarded a Certificate of Excellence in Real Estate Development and Finance. He earned the right to use the CFA designation in 2006. He is the founder of Themis Capital Management, an investment firm focused on concentrating capital and talent on high-potential opportunities in Sub-Saharan Africa. Prior to founding Themis, he worked with Kohlberg Kravis Roberts, a leading global investment firm. His experience also includes working with the Standard Bank Group, where he led the mergers and acquisitions team in Nigeria. Mr Aiyesimoju spent the early part of his career with Ocean and Oil Holdings Limited, a principal investment firm in Nigeria and ARM Investment Managers, one of Nigeria’s leading investment advisory and wealth management firms. He co-founded Foodpro Limited, a nutritional snacks business focused on edible nuts, where he currently serves as a non-executive director. He joined the Board of UAC of Nigeria Plc in March 2018 and was appointed the Group Chief Executive Officer on 01 April 2019. He became Chief Executive Officer of the UPDC on 06 August 2018. Mrs Deborah Nicol-Omeruah is the Deputy Managing Director of UPDC. Mrs Nicol-Omeruah holds a Bachelor’s Degree in Architecture from the University of Nottingham, United Kingdom (2002). Mrs Nicol-Omeruah is a Real Estate Professional and a Certified Mortgage and Financial Adviser by the Institute of Financial Services in the United Kingdom. She has over 15 years’ experience in real estate and banking with specialization in Property Development, Finance & Acquisitions; Mortgages; Private Banking and Investment Planning in the United Kingdom and


27

Africa. Mrs Nicol-Omeruah served as the Chief Commercial Officer of UPDC prior to her appointment as Deputy Managing Director. Prior to joining UPDC, she was the Account Director for Africa at Broll Property Group directing the asset and transaction management of Standard Chartered Bank’s real estate portfolio in Africa; Chief Operating Officer for Landmark Group, an Africa focused real estate company; and Head of Property Finance & Acquisition and Head of Home Loans at Stanbic IBTC Bank PLC. In the United Kingdom, she worked as Senior Wealth Planning Manager at Lloyds TSB Private Banking UK and Premier Financial Planning Manager of HSBC Bank Plc, between 2002 and 2008. She became the Deputy Managing Director of UPDC in January 2020. Mrs Folakemi Fadahunsi is the Chief Financial Officer of UPDC. Mrs Fadahunsi is a Transformation Expert, with relevant experience in transforming the finance functions of various companies, including companies in the Real Estate Sector. She has over 18 years’ experience working with various companies including Arthur Andersen (now KPMG Professional Services), Honeywell Group and PricewaterhouseCoopers. Her experience cuts across Consumer Markets, Telecommunications and the Public sector. Mrs Fadahunsi has a Bachelor of Science Degree in Engineering Physics from Obafemi Awolowo University, Ile-Ife (1999) and a Master’s of Business Administration from Manchester Business School, Manchester, United Kingdom (2012). She is a Fellow of the Institute of Chartered Accountants of Nigeria. She was appointed to the Board of the Company in March 2019. Mrs Awuneba Ajumogobia is a Non-Executive Director of UPDC. Mrs Ajumogobia is a fellow of the Institute of Chartered Accountants of Nigeria and graduated from the University of Ibadan with a degree in Economics (1982). She has acquired broad professional experience over three decades in the provision of assurance, taxation, finance and advisory services across several industries. She worked at the professional service firms of Peat Marwick, Deloitte and Accenture. She serves on the Board and Risk Management Committee of UPDC. She served on the Board of UAC of Nigeria Plc for 10 years (2009 – 2019) and held key roles such as the Chairman of the Board Risk Management Committee, as well as a member of the Statutory Audit Committee. She was recently appointed as the Chairman of the Board of Chemical and Allied Products PLC (“CAP”). This is in addition to being on the boards of a number of private companies including her current role as Executive Director of Multistream Energy Limited. Mrs Ajumogobia gives her time to a number of research, educational and social projects which include her membership of the Board of University of Ibadan Research Foundation, Finance Committee of Musical Society of Nigeria, role as chairperson of the Governing Council of Grange School, Lagos and is on the Executive Council of Women in Management, Business and Public Service. Mrs Ajumogobia remains committed to personal professional development in Private Equity, Finance, Risk Management, Financial Journalism, the Education Sector and Leadership at local and global programmes including Harvard Business School, London Business School, IMD, Bloomberg Media Initiative and Lagos Business School. She was appointed a Non-Executive Director of the Company on 06 August 2018. Professor Okon Asuquo Ansa is a Non-Executive Director of UPDC. Professor Ansa was educated at King’s College, Lagos and at Ahmadu Bello University, Zaria where he graduated with a B.Sc. (Hons) in Agriculture in 1974 and an M.Sc. in Crop Protection in 1977. He obtained a Ph.D. in Plant Pathology from the University of California, Davis, California, USA (1983). He is a seasoned administrator who has served as Head of academic departments and units in Universities in Zaria, Calabar and Uyo. He was Dean of the Faculty of Agriculture and later Director of Academic Planning before his elevation to the position of Deputy Vice-Chancellor at the University of Uyo. He is currently a Professor of Plant Pathology at the University of Uyo and a Visiting Professor at Akwa Ibom State University. He served as Commissioner for Agriculture and Commissioner for Commerce and Industries in Akwa Ibom State. He has also held a number of positions in corporate Nigeria as Chairman, Akwa Palm Industries Limited; Member, Board of ADC Airlines; Chairman, Ibom Power Company Limited; Member, Akwa Ibom Industrial and Investments Promotion Council. Prof. Okon Ansa holds the national honor of Officer of the Order of the Federal Republic (OFR). He joined the Board as a Non-Executive Director on 26 March 2013. Mr Adekunle Awojobi is a Non-Executive Director of UPDC. Mr Awojobi is a Fellow of the Institute of Chartered Accountants of Nigeria, Nigeria Institute of Management, Certified Fraud Examiner and Member Institute of Internal Auditors. He also holds a Bachelor of Science degree in Economics with First Class Honors from Ogun State University (now Olabisi Onabanjo University) Ago-Iwoye, Ogun State (1989). Prior to joining FBNQuest Trustees Limited in 2002, he was an


28

Audit senior with KPMG audit and Internal Auditor, Carnaud Metalbox (now Nampak) Nigeria Plc. He joined FBNQuest Trustees Limited in 2002 as Manager, Operations and was later promoted to Senior Manager, Operations based on his outstanding performance. He was then moved to head the Capital Markets & Projects Unit of the Investment Banking Department. In February 2007, he was appointed Head, Operations & IT and elevated to the position of Assistant General Manager. In August 2012, he was appointed the Chief Executive Officer, the position he holds till date. He has attended various courses within and outside Nigeria. He was alternate Director for several years before his appointment as a substantive Non-Executive Director on 17 December 2012. Mr Oyekunle Osilaja is a Non-Executive Director of UPDC. Mr Osilaja holds a Bachelor’s Degree from the University of Lagos (1984) and has attended management courses at INSEAD Business School, France and Warwick University, United Kingdom. In his previous role, he was the Group Head of Real Estate for Ecobank Transnational Incorporated and Head, Ecobank Capital, Nigeria. Before joining Ecobank Transnational Incorporated in 2012, Oyekunle spent most of his professional career in Jones Lang LaSelle Corporate Finance in London as an Executive Director covering advisory, debt and structured finance. Mr Osilaja has a wealth of experience in the real estate sector and has amassed a considerable track record of closing big ticket corporate real estate advisory debt transactions. He became a Director of UPDC in January 2020. Mr Babajide Fetuga is an alternative Non-Executive Director of UPDC. Mr Fetuga is a graduate of the department of Economics from the University of Ibadan (1997). His work experience spans over 15 years across the banking, financial services and telecommunication industries. Prior to joining FBNQuest Trustees Limited, he worked with Celtel Nigeria Limited (now Airtel Nigeria Limited) as the regional corporate sales manager covering the whole of the South-South region. Mr Fetuga began his banking career at Ecobank Nigeria Plc. He also had brief stints at Capital Bank International (formerly known as Commercial Bank Credit Lyonnais) and Standard Chartered Bank Nigeria Limited. He has vast experience in retail, commercial banking and branch development, and has also gained in-depth knowledge in sales and marketing from attending various courses within Nigeria.

9. MANAGEMENT TEAM

The Management team of UACN Property Development Company Plc comprises of six seasoned professionals who are saddled with the responsibilities of taking decisions for the day-to-day management of the Company with a view to ensuring goals set by the Board are achieved. Besides the Chief Executive Officer, Chief Finance Officer and the Executive Director, Facilities Management, other members of the management team include: Mr Tony Aruede – Head of Projects: Mr Tony Aruede is a full member of the Nigerian Institute of Architects and the Architects Registration Council of Nigeria. He holds a Master’s degree in Architecture from the University of Nigeria, Nsukka (1989); a Master’s degree in Construction Management from the University of Lagos (1999); and an MBA from Lagos Business School, Pan Atlantic University (2007). He previously worked as a Project Manager for the Allstates Banking Group, the Shell Petroleum Development Company, and has spent the last decade managing TNA Associates, a firm of Architects, Project Managers and Development Consultants. He was appointed as Head of UPDC’s Projects team in 2019. Mr. Aruede works with UPDC on a short-term contract; the Company is focused on identifying a substantive head for this function. Mrs Folake Kalaro – Company Secretary / Head of Legal: Mrs Kalaro graduated with an LL.B degree from Obafemi Awolowo University, Ile-Ife (1993). She was called to the Nigerian Bar in 1995. She also holds an LLM degree from the University of Lagos, Akoka (2012). Prior to joining UAC in May 2003 as the Contracts & Drafting Manager, she worked with the firms Bolaji Ayorinde (SAN) & Co and Rickey Tarfa (SAN) & Co where she cut her teeth in legal practice. She became the Manager, Legal Services of UPDC in February 2009 and was appointed the Company Secretary in May 2017. Mrs Kalaro has attended several courses amongst which are Best Practices for Managing and Leading in-House Legal - Euromoney Legal Training and Managing Compliance & Legal Risks at the Lagos Business School, Entrepreneurial Skill Development, Corporate Governance for Company Secretaries, Legal Advisers & Compliance Officers and Understanding Evolving Regulatory Trends.


29

Mrs Bolarin Okunowo – Head, Corporate Finance: Mrs Okunowo is a qualified Chartered Accountant and she holds a Bachelor’s degree in Commerce from the University of Birmingham, United Kingdom (2000), and a Master’s degree in Information Systems from the prestigious London School of Economics, United Kingdom (2001). She is a well-seasoned finance and investment specialist with over 15 years’ experience in a range of finance roles including debt advisory and finance, corporate finance, principal investments and financial management. Mrs Okunowo joined the UAC Group in 2018 as Head, Corporate Finance, charged with the recapitalization of UPDC, a subsidiary of the UAC Group. Prior to joining the UPDC, she was the Head, Energy & Infrastructure Finance at Stanbic IBTC Capital Limited, charged with responsibility for the oil and gas, power and infrastructure debt finance portfolio of the company. She has extensive experience in debt restructuring and recovery for complex transactions. Before her stint at Stanbic IBTC Capital Limited, she worked at Asset & Resource Management Company Limited where she pioneered work on the company’s Hospitality & Retail Fund as well as executed a host of financial advisory mandates across multiple sectors in including infrastructure, government (PPP), aviation, real estate (retail & hospitality), advertising, food and financial services. She also worked at PriceWaterhouseCoopers providing audit services to the firm’s financial service clients. Mrs. Okunowo is an employee of UAC on secondment to UPDC. Mr Albert Toye Thomas – Head, Human Resources: Mr Thomas is a graduate of Sociology from the Lagos State University and attended the Advanced Management Programme at Lagos Business School (2008). He is an Associate Member of the Chartered Institute of Personnel Management of Nigeria and an Affiliate Member of the Chartered Institute of Personnel Development of United Kingdom. Mr Thomas joined UAC in 2001 as a management trainee and has held several positions across the UAC Group including Staff Admin & Training Manager, Logistics Manager at Grand Cereals Limited (a subsidiary of UAC), Human Resource Manager CAP Plc (a subsidiary of UAC), as well as Compensation & Industrial Relations Manager, Resourcing & Development Manager and Organisational Change Manager, all in the group human resource department of UAC. In 2019, he joined UPDC as Head, Human Resources.

10. OVERVIEW OF THE NIGERIAN REAL ESTATE SECTOR The Nigerian real estate sector has faced significant challenges over the last three years, plagued by a number of challenges occasioned by the 2016 recession and the effects of devaluation of the Naira. These challenges have led to higher borrowing costs, compression in asset values and rental yields, high property development costs and low demand for properties.

Nonetheless, with the return to stable macroeconomic conditions, the medium-term outlook for the sector is positive. Given Nigeria’s demographics, substantial housing deficit and underdeveloped infrastructure, there are significant growth opportunities in the sector. Consequently, the real estate sector remains an attractive investment proposition with opportunities across various industry categories.

Residential real estate Demand for residential housing will be driven by the growing middle class as families strive for home ownership in cities close to where they work. According to the Center for Affordable Housing Finance Africa, formal housing production is at approximately 100,000 units per year, which is grossly inadequate given that 1,000,000 units are needed yearly to bridge the 17 to 20 million housing deficit. Commercial real estate In spite of the macro challenges, there has been considerable investment in commercial properties, with several A-grade projects currently underway in key cities. The Nigerian commercial real estate market has been positively impacted by an influx of foreign businesses into Nigeria as well as an increase in the number of locally established businesses across various sectors. The estimated foreign equity capital investment in commercial real estate over the past five years is c. US$800m which was used to develop and complete over 30 grade A and B office and retail properties, excluding owner occupied assets such as corporate headquarters. Overall, approximately 315 commercial real estate assets have been developed over the past five years and this number is expected to continue to grow.


30

Industrial real estate The industrial real estate segment remains largely untapped, with significant potential for development with corporate tenants. Opportunities in the sector will be dependent on proximity to transportation routes such as major roadways and free trade zones. According to the Nigeria Export Processing Zones Authority, the country currently has 14 operational free trade zones (schemes set up to strategically improve the investment climate by stimulating export-oriented business activities), with 11 zones currently under construction. While the Company’s performance has been negatively impacted by the sector’s challenges in recent years, the management of the Company is working actively to ensure UPDC remains an influential player in the future of the industry.


31

11. RISK FACTORS

Business Risks - These are risks associated with the business activities of the Company The market value of UPDC’s portfolio and its revenue, cash flow and profits from the sale of properties are dependent on economic conditions and the real estate market in Nigeria UPDC generates a significant proportion of its revenues from the sale of properties. Market values of properties in Nigeria are generally affected by overall conditions in the economy, political factors and one-off events, including the condition of financial markets, the cost and availability of finance to businesses and consumers, fiscal and monetary policies, changes in government legislation, political developments, including changes in regulatory or tax regimes, changes in unemployment, FGN bond yields, interest rates and credit spreads, levels of prevailing inflation, the supply of, or a reduction in demand for, residential and commercial property, the returns from alternative assets as compared to residential property and environmental considerations. Residential and commercial real estate values are also affected by factors specific to each local market in which the property is located, including the supply of available property and demand for residential real estate and the availability of mortgage finance to prospective purchasers. The Company also holds investment properties for long-term rental yield and capital appreciation. Increases or decreases in the valuation of investment properties are recorded as a revaluation gain or loss in the Company’s financial statements and consequently have an impact on UPDC’s operating results. The Company’s ability to generate revenue and cash flow from the sale of its properties depends on the existence of buyers willing to pay attractive prices fo

Documents

UACN Property Development Company Plc...UACN Property Development Company Plc RC321582 Rights Issue of 15,961,574,145 Ordinary Shares of 50 kobo each at N=1.00 per Share on the basis